As mentioned in the Conservative party manifesto, tax relief for pension contributions is to be restricted for those with income in excess of £150,000 a year. We were told that this is intended to fund the increase in the inheritance allowance for passing on the family home.
The current £40,000 pension annual allowance will be reduced by £1 for every £2 of income in excess of £150,000 down to a minimum of £10,000 at £210,000 of income. So, for example, where an individual has income of £170,000 in 2016/17, the £40,000 annual allowance would be reduced to £30,000.
Note also that, as already announced, the pension lifetime allowance is due to be reduced from £1.25 million to £1 million from 6 April 2016 with transitional protection for those with pension savings in excess of the new limit.
The Chancellor also announced in the July Budget that there would be a further review of pension savings and pensions taxation.
Contact us if you need advice on pension planning and how the new pension rules will impact on you personally.